US firms contemplate their post-Brexit moves

Now that UK prime minister Theresa May has invoked Article 50 of the Treaty of Lisbon, the negotiation process will officially begin between representatives from the EU27 and the UK government. As negotiations unfold, US companies will continue to build contingency plans and “investigate where and how much of their resources can or will be moved to EU jurisdictions”, says Edmund Parker, head of banking and finance at London-based law firm Mayer Brown.

US financial firms – like Goldman Sachs – are likely to begin their shift from “contingency planning to action fairly soon”, as a result of immediate regulatory uncertainty, says Jonathan Portes, a professor of economics and public policy at King’s College London. However, the scale of US investor fallout is likely to depend on the nature of the industry. Mr Portes says that investors in other industries are likely to opt for a wait-and-see approach to the Brexit negotiation process, especially those that depend on industry-specific regulations, such as pharmaceutical and chemical companies. 

Relocation plans

Richard Gnodde, CFO of Goldman Sachs International, announced the company’s intention to relocate “hundreds of workers” from its London office in an interview with CNBC. “We are licensed with banks in Germany and in France,” he said. “Over the next 18 months or so we are going to upgrade those facilities…[and] we will be increasing our headcount [in those offices].” 

The US-UK economic partnership is one of the most profitable in the world in terms of investment, employment and trade access. In 2015, US FDI in the UK accounted for a record $593bn, while US affiliate companies employed about 1.4 million UK workers, according to a report commissioned by the American Chamber of Commerce to Europe (AmChamEU). The report also indicates that US investment in the UK is almost double the amount that US businesses invest in South America, Africa and the Middle East combined ($244bn). 

Other US businesses could join Goldman Sachs as the Brexit negotiation process continues to unfold. Many US companies invest in the UK as a means of acquiring access to the much larger EU single market. In fact, US affiliated companies based in the UK ship more to the EU than US companies based in China export to the rest of the world, according to the AmChamEU report.